Outsourcing Research Information: An Introduction
Jinfo Blog

By R. Sivadas

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The global information industry has been a witness to phenomenal changes in recent times. Recent industry estimates peg the global information industry at about $358 billion (GBP 188 billion) in 2005 and forecast the market to grow to over $458 billion (GBP 240 billion) in 2009. Of this, the research information space, including market, company and financial information, is forecasted to grow to about $74 billion (GBP 40 billion). Growth in the global information market is primarily driven by technological advancements, increasing digitisation, growth in emerging markets, globalisation and increasing trends towards intellectual property protection. Regulatory compulsions, such as the Wall Street settlement, in which 10 major firms paid $1.4 billion to settle claims of egregious conflicts of interest, are also influencing the overall research market.

The emergence of the KPO/RPO industry

A more recent trend, albeit similar to that in the overall IT and Business Process Outsourcing (BPO) industry, is the emergence of off- shoring high-value-added processes, namely business and financial research support services and intellectual property-related support services. This represents a new emerging area: Knowledge Process Outsourcing (KPO). According to a NASSCOM-McKinsey report from 2002, the total outsourcing opportunity of non-IT activities is an estimated $141 billion (GBP 74 billion) by 2008. Of this, the report values the research and allied services opportunity at about $18 billion (GBP 9.4 billion). However, we at Scope eKnowledge Center estimate that only about 45 per cent to 50 per cent actually will be outsourced during this period. Market research, competitive intelligence and data search, and integration will be the fastest-growing segments of all the various research activities.

Research Process Outsourcing (RPO) is a part of the overall KPO industry. In the recent few years, this market has witnessed tremendous transformation. From the administration of telephonic surveys and questionnaires using call centres in the early years of the 21st century, the industry has progressively moved to handling information search and compilation activities on various business, technology and economic aspects. At present, high-end tasks such as competitive intelligence, preparation of company profiles, and financial analysis and modelling, are being handled by companies in India.

In line with this evolution, the RPO market has also seen the emergence of a diverse range of players across a wide range of services. The financial research area for instance is dominated by captives set by large global players such as Goldman Sachs, Lehman Brothers and JP Morgan. In case of other areas, such as business research, data analytics, legal and IP services, there is a mix of captive and third-party providers such as Scope eKnowledge Center and Office Tiger.

Predominant growth drivers for the RPO industry

Given below are the prominent growth drivers for the RPO industry:

• Technology and content related.
  
  
  • Decline in telecom/information processing costs
  • Proliferation in information content
  • Increased time spent by executives on searching for information rather than actual value-added analysis

• Economic and market related.
  
  
  • Pressure on the cost front
  • Rapid globalisation
  • Rapid consolidation
  • Regulatory Pressure with regard to Wall Street

• Organisational related.
  
  
  • Need to focus on core competencies
  • Optimal use of resources
  • Supplement internal expertise/broaden range of offerings.

Key benefits of RPO

Some of the major benefits of RPO include:

• Cost savings (about 30 per cent to 40 per cent, depending on the research deliverable being outsourced)
  
  
• Access to a large talented workforce
  
  
• Improved scale of operations (a typical investment banking analyst can increase the coverage of stocks several fold)
  
  
• Free up critical resources to focus on core competencies
  
  
• Leverage specialised knowledge and expertise
  
  
• Enhance innovation and productivity levels creating stronger intellectual property (this smoothes out fluctuations in resource demand and reduces time to market)
  
  
• 24x7 operations.
  
  

Prominent RPO models

There are three basic RPO models, based on value created and the complexity of the task involved. These are elaborated below:

Transactional model. This model is usually at the start of the RPO relationship. Projects are typically low in terms of the value created and in complexity. Such engagements are based on specific transactions and showcase the vendor's expertise and execution capabilities. The client benefits from value that is created through good project execution.

Relationship model. Once the RPO engagment begins to stabilise, the preferred model is one of relationship. Here, the contracts begin to get bigger and last longer. The vendor begins to showcase more of research process expertise and value is created through process enhancements.

Partnership model. This model is the preferred long-term model. It involves the joint development of business propositions and embedded systems and allows the client to experience greater value through efficient business process management.

Off-shoring: the lessons learnt

Based on our prior experience in working with global clients in the research space, some of the key points to bear in mind include:

• Benefits are linked to scale of the project: the bigger the project, the better the benefits
  
  
• Outsourcing involves time and effort from your side too, especially in the initial stages
  
  
• Be wary of outsourcing processes that you are not familiar with or that are not working internally
  
  
• Always carry out a pilot project first and start with low-risk projects
  
  
• Have realistic savings estimates: 70 per cent is not possible; 30 per cent to 40 per cent is possible
  
  
• Productivity gains will stem from a learning curve, albeit with time
  
  
• Be clear on the final deliverable, including its structure and nature
  
  
• Define quality parameters and delivery schedules
  
  
• Look at the offshore company as a long-term partner not a vendor
  
  
• Finally, communicate, communicate, communicate!
  
  

Challenges and limitations in RPO assignments

Despite adopting various processes, integrating diverse IT platforms and putting in the best teams, there are certain challenges and limitations to keep in mind. These include:

• Ambiguity will not work. Research projects that are outsourced should be very specific. Too much ambiguity will reduce the potential benefits with too many iterations and communication delays.
  
  
• Know consumer, brand and regional nuances. Don't expect the offshore partner's team to have specific knowledge and expertise on specifics and nuances of consumers, brands, the locale and region. The team can only supplement your expertise; it can't replace local knowledge.
  
  
• Avoid complex, consumer market-research studies. It is unlikely that outsourcing complex, consumer market-research studies will be successful despite the boom in the global call-centre industry. In contrast, business-research services based on secondary research such as the internet are highly amenable for outsourcing.
  
  
• Don't expect; advise. You still have to think. Outsourcing will not result in the delivery of customised, well-defined recommendations akin to a consultant. Instead be prepared only for facts and analysis upon which you will still need to make your decisions.
  
  
• Outsourcing is a choppy ride in the initial phase. At least during the initial phase of the outsourcing assignment, the progress is likely to be slow and erratic. Don't expect a smooth and immediate transfer of all capabilities and processes.
  
  
• If it doesn't work for you, it's unlikely to work for your outsource partner. Avoid offshoring research activities that have been failures at your end. This is because you will be providing the same set of guidelines that were used to execute the project at your end. Consequently, the offshore vendor too is likely to repeat the same mistakes resulting in the failure of the offshoring process. In the end both parties are likely to be disillusioned by the entire engagement.

Related FreePint links:

• Outsourcing Research to India <http://www.freepint.com/issues/161204.htm#tips>
  
  
• Post a message to the author, R. Sivadas, or suggest further resources, at the FreePint Bar <http://www.freepint.com/bar>
  
  
• Read this article online, with activated hyperlinks <http://www.freepint.com/issues/191006.htm#tips>
  
  
• Access the entire archive of FreePint content <http://www.freepint.com/issues/>
  
  

Related links:

• Scope e-Knowledge Center <http://www.scopeknowledge.com/>
  
  
• The Outsourcing Institute <http://www.outsourcing.com/>
  
  
• "Offshore Knowledge Process Outsourcing Emerges", Forrester, <http://digbig.com/4nhrf>
  
  

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